Market Overview: Bitcoin
Bitcoin continues to captivate markets, breaking out of a prolonged six-month trading range. This upward movement trades uncharted territories on the upside, leaving prior downside levels increasingly unlikely to be revisited. Historically, Bitcoin has experienced near 80% drops, suggesting that if the price reaches the $100,000 milestone—a plausible event—it may never fall far below $20,000 again. By employing this 80% drawdown model, we can identify future key sweet spot areas, within the lower third of the hypothetical 80% drawdown range.
For investors, dollar-cost averaging remains a solid approach, with accentuated buying on strong dips. For day or swing traders, Bitcoin continues to provide valuable opportunities, excelling in both breakout and trend-following strategies.
Bitcoin
The Weekly chart of Bitcoin
Bitcoin’s weekly chart shows a breakout from a six-month trading range between $60,000 and $70,000. This range acted as a battleground of equilibrium, with $60,000 offering reliable support and $70,000 as resistance. Bears attempted to push Bitcoin lower, targeting a retest of mid-range levels around $40,000, but aggressive buying at $50,000 held the market steady.
A breakout above the March 14th all-time high occurred last week, marking a pivotal shift of the market cycle. This move was a bull breakout, suggesting a potential measured move toward the $100,000 mark. The swift follow-through indicates robust confidence among buyers who recognized the prior week’s close as sufficiently strong to enter positions without waiting for further confirmation.
Bulls are now in control, driving the market. However, as the $100,000 level approaches, resistance may emerge as bulls look to secure profits, those buying from the $50000 mark doubling their capital. Meanwhile, bears anticipate a test of the breakout point near $74,000, which is a typical move to expect in Bitcoin. However, they face the possibility of significant upward momentum before any meaningful pullback occurs. Last week, we warned that based upon historical behavior, fading bull breakouts in Bitcoin often result in losses.
The Daily chart of Bitcoin
The daily chart shows Bitcoin in a strong bull breakout, which evolved into an 11-bar bull micro channel. This pattern reflects relentless buying pressure, and the first close after trading below a prior bar, will likely be bought.
The current move resembles a bull breakout, spike and channel bull trend, with potential scenarios ranging from continuation into a spike and channel bull trend, to a trading range or a failed bull breakout. While a failed breakout would mean a return to the breakout point near $67,000, the prevailing probability favors bulls, as two of the three scenarios involve retesting the bull breakout high. Traders should consider buying on a pullback or buying in portions and scale in lower in case of a pullback; ultimately, they expect a test at the hypothetical highest high, or higher close.
From a bearish perspective, the $100,000 area may act as a resistance, as bulls take profits. Bears might find selling opportunities at this psychological level, employing limit orders with tight stops around $105,000-$110,000 and targeting retracements toward $90,000 or $80,000. However, given the strength of the current trend, it’s best to use at least a 2:1 risk reward ratio, since the probability of the price continuing up will likely still be high.
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